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Happy Birthday to my blog – Week 4 (Business Support)

May 31, 2021

I started this blog because I wanted to help business owners.  So, it only seems fitting that I am rounding out the month of celebrations by highlighting some of my posts over the last year that were aimed at supporting business-owners:

Also, I have taken some time to reflect on the last year and the purpose and reach of “The Tax Chick Blog” and “The Tax Chick Podcast”.  I have made the decision to move from writing a weekly blog, to a monthly blog, starting in June 2021.  My plan is to supplement monthly blog posts with other sources of information provided on my LinkedIn page, Instagram page and through the podcast!

Here are the other places you can find “me” and my content:

Thank you from the bottom of my heart for your support over the last year.  Creating “The Tax Chick” brand has opened me up to so many new opportunities and has allowed me to meet and connect with some wonderful people.  I am excited to continue sharing this content with all of you.  As always, if there are topics you would like to see covered in the blog, or podcast – or if you would like to be a guest on my podcast, please send me an email: thetaxchickpodcast@gmail.com.

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Happy Birthday to my blog – Week 3 (Tax Court of Canada)

May 17, 2021

The very first blog post that I ever put out into the world was a post about the Tax Court of Canada and the plan for reopening in light of the COVID pandemic.

I posted a few times over the past year about the Tax Court of Canada.  Check out these blog posts for more details:

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Happy Birthday to my blog – Week 2 (Tax Litigation)

May 10, 2021

One of my favorite parts of being a tax lawyer is being able to act on behalf of taxpayers in their communications with Canada Revenue Agency.  I am passionate about making sure that taxpayers understand the dispute resolution process – and I wrote about this A LOT in the last year!

To learn more, check out the following blog posts:

And if you are interested in listening to two tax litigators talk about the tax dispute process, check out this episode of The Tax Chick Podcast (with special guest, Sophie Virji):  https://thetaxchickpodcast.transistor.fm/s1/5

And, if you are interested in learning more about tax audits, I am hosting an Instagram Live on May 12th at 10:30 a.m. (CST) – my IG handle is @tax.chick – here is the info!

What is a tax audit, and what do I actually NEED to know about it?

First, don’t panic. I know it’s probably the last thing you need after all you’ve been doing to keep your business and family running. Take a deep breath, then tune into my Instagram Live with CPA Taheera Fidaali (@tula.cpa) on May 12th at 10:30 am CST. We’ll cover what you need to know about tax audits!

(The IG live will be recorded and available on our feeds following the event if you are not able to attend live.)

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Happy Birthday to my Blog – Week 1 (Estate Planning)

May 3, 2021

I cannot believe it, but this month, my little blog that could – The Tax Chick Blog – turns 1 year old!

I have decided to celebrate the birthday month by recapping some of my favorite blog posts from last year!

In this week’s blog post, I wanted to reminisce about the time I decided to expand my content to talk more about estate planning.  Tax is EVERYWHERE and it touches on all other areas of the law.  While tax should not be the driving force behind estate planning decisions, it is important to have knowledge about the tax consequences of certain actions. 

To learn more, check out the following blog posts:

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Tax Resources 101

April 26, 2021

Sometimes I wish there was a website that had all of the key resources for tax information all in one place.

However, I recognize that different people need different types of tax information depending on where they are at in their life.

I get a lot of queries about where to “start” when trying to get up to speed on tax issues.  So I thought it might be helpful to provide an initial list of some of the places I go to for information.  This is not an exhaustive list!  If you would like more comprehensive information, check out my LinkedIn post from today – I am asking friends and followers to share their favorite sources of tax information.

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Federal Budget Day!

April 19, 2021

Federal budget day is a bit like the Oscars for tax professionals.

Most of us are just seat fillers anxiously awaiting the results.

Before I became a tax lawyer, I never really paid attention to the federal budget.  I did not take the time to stop and think how the decisions at the federal level impacted my daily life.

But the truth is that behind every tax rule is a policy.  Guess who makes policies?  The government.  So it is important to pay attention to the budget and the plan for the year – because that plan gives insight into the underlying “policies” that the government is trying to support or suppress at the moment.

Now, I block off the day in my calendar, sign-up for every webinar, and sit with my colleagues to digest the news.

And of course, there is the flurry of activity that happens prior to the budget.  Like clockwork, about 2 months before the budget, my clients start asking me to predict the future – “Amanda, what do you think will happen?  Will they increase the capital gains inclusion rate?  Will they get rid of the exemption altogether?”  Unfortunately, I am not psychic. 

Today, I thought it might be “fun” to give a bit of history about the federal budget and also to give some insight into where I get my information on Budget Day.

~ ~ ~

Fun Facts about the Federal Budget

  • Budgetary reports have been presented by the federal minister of finance since 1867.
  • There is no requirement for the government to present a new budget in each fiscal year… remember 2020?  The government chose not to release a budget because of the pandemic.  In the interim, the government gets authority to spend money by presenting estimates – they have to get approval from the House.
  • Prior to the more recent delay due to COVID, the longest stretch between budgets was 482 days between March 2, 1943 and June 27, 1944 – this was due to a combination of World War II and an overwhelmed finance department.  Why were they overwhelmed?  Well, finance realized it had much higher revenues than projected and the war looked like it was going to end.  They were facing public scrutiny over unpopular taxes, and did not know how to explain the fact that they were drowning in cash.  Not surprisingly, a lot of the more unpopular taxes were cancelled in that budget.

To learn more about the history of the Federal Budget, check out this great article in Maclean’s: https://www.macleans.ca/economy/economicanalysis/a-brief-history-of-canadian-federal-budgets/

What I am going to be doing on Budget Day 2021

Here is the link to the formal announcement of the budget: https://www.canada.ca/en/department-finance/news/2021/03/government-of-canada-announces-date-of-budget-2021.html.

Typically, there is an opportunity for certain press and invited members to have an embargoed reading – a chance to see the budget before it is presented.  Usually this happens in person, but this year will happen virtually.  This gives an opportunity to digest the information and prepare questions for the news conference that typically occurs following the formal reading of the budget.

I typically try to watch the announcement of the Budget live – this year, it will be presented at 4:00 p.m. E.S.T.   However, typically the formal reading of the Budget does not always give much insight into the details of the plan.  That is found in the Budget documents themselves.  Past Federal Government Budgets can be found here: https://www.canada.ca/en/department-finance/services/publications/federal-budget.html. You will note that each one is centered around a “theme” with the most recent theme being “Investing in the middle class” from 2019.

I also make sure that I sign up to receive newsletters and participate in webinars put on by organizations that have an opportunity to see an embargoed copy of the Budget.  For example:

Happy Budget Day everyone!  (Let’s hope that we do not have a repeat of Budget 2017 and the chaos that ensued with the introduction of TOSI…)

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Mixing friendship and business can sometimes be a dangerous cocktail.

April 12, 2021

Does this story sound familiar to you?

Jill is an amazing baker.  Her best friend Sally is an amazing chef.  They are sitting around one evening and come up with an AMAZING idea.

A bed and breakfast.

It would be perfect!  Jill could whip up scrumptious desserts, and her warm and friendly nature would be wonderful with guests.  Meanwhile, Sally could make mouth-watering breakfasts and use her social media skills to bring in new guests.

What are some things that Jill and Sally should keep in mind?

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Who is on your team? The importance of collaboration in business and beyond.

April 5, 2021

Sometimes I feel a bit like a broken record because I am always telling others to “establish their team”. 

In fact, I have written on this topic several times before – for example:

The other day, a new business owner posed a couple great questions in response to my constant musings about “establishing your team”:

  1. How do I know who needs to be on my team?
  2. What if I cannot afford to have a team?

These are great questions, and it got me thinking about the fact that I keep approaching the discussion about “teamwork” from the same angle.  So this week, I want to take a new approach to the discussion… here we go!

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Canadian income tax law 101: for individuals (Part III)

March 29, 2021

In last week’s blog post, I shared with you the line item in the income tax return that causes me the most stress – Line 150.  The “refund” versus “you owe tax” line.

Keep in mind that if your primary source of income is employment income, your employer would have deducted income tax from your pay cheque over the year.  On the T4 slip that you receive, it will state what your “gross” earnings were for the year (i.e., what you made before deductions), and will also set out what amounts were taken off of your gross earnings (i.e., for income tax, benefit plans, and maybe other fees such as union dues).  Therefore, if you are curious how much income tax you paid during the year on your employment income, just take a peek at your T4 slip.

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Canadian income tax law 101: for individuals (Part II)

March 22, 2021

In last week’s blog post, I reminisced about sitting at the dining room table with Dad working on our tax returns.  We talked about the basic tenants of taxation in Canada, and also the various sources of income.  We also learned how to calculate taxable income.

This week, I want to tackle an often-misunderstood set of concepts: credits versus deductions.

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Canadian income tax law 101: for individuals (Part I)

March 15, 2021

When I was growing up, every year my Dad would work on his income tax return (and my Mom’s return) at the dining room table.  This was back when we had to do everything by paper.  He would pick up two copies of the income tax forms from the local post office and would fill out the first one in pencil, double check it for errors, and then copy everything over to the “good copy” in pen.  He and Mom would then ceremoniously sign the last page.

Once I started working part-time in high school, I joined him at the dining room table and worked on my return as well.  As someone who is not that fond of forms, spreadsheets and math, this was not a pleasant experience for me.  However, in hindsight, I am very grateful that my Dad encouraged me to do this for myself – I entered adulthood with a basic understanding of how it all worked.

In the last few years, I relinquished control of my tax returns to my very capable accountant.  However, when I receive the draft returns for review, I actually still review them on a line by line basis.  After all, as a tax lawyer, I cannot really rely upon the “I did not understand” defence.  (Side note:  Almost no one can rely upon that defence anymore anyway!)

So if you are reading this blog and thinking, “How does the Canadian system work?” then these next few blog posts are for you!

This week, we will discuss some foundational concepts regarding Canadian income tax law. 

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Help! I have a question and I do not know who to call!!!

March 1, 2021

It is that time of year again… the time where we all start thinking about our tax returns.

Over the next couple of weeks, I thought it might be helpful to discuss a few topics relevant to filing a tax return.

One of the most common questions I get asked by taxpayers is how to get ahold of Canada Revenue Agency (“CRA”) if they have a question.  Unfortunately, unless you can access the special phone line for tax preparers, you might be in for a bit of a journey.

So fasten your seatbelt, crank up your favorite tunes and let’s navigate this journey together!

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It’s a burden! Who bears the onus of proof in tax cases?

February 22, 2021

In Canada, if I decide to sue you for a breach of contract (for example), I would bear the “burden” (i.e., the responsibility) to prove that you breached the contract.  You (as the defendant) would have no responsibility to disprove my claims.

A very different scenario exists in the realm of tax litigation.  In most scenarios, it is the responsibility of the taxpayer to disprove an assessment made by CRA. 

WHEN DOES THE TAXPAYER BEAR THE BURDEN?

At the Tax Court of Canada, the general principle regarding “burden of proof” is that the taxpayer bears the burden of disproving an assessment by CRA.

In the legal documents filed with the Court, the taxpayer would file a document called a “Notice of Appeal” which sets out the taxpayer’s issues and basis for appealing.  In response, the Minister of National Revenue (through the Federal Department of Justice) files a document called a “reply”. 

In looking at the Reply, there is a key portion of the document called the “assumptions”.  In this part of the document, the Minister sets out the assumptions made that led to the reassessment.  It is the job/responsibility of the taxpayer to “demolish” each of these assumptions.  Namely, the taxpayer must:

  • Show the assumption is wrong; or
  • If the assumption is right, show that it is irrelevant to the reassessment, or does not support the reassessment.

If the taxpayer fails to do this, they will lose the appeal.  This basic requirement comes from the Supreme Court of Canada case, Johnston (1948) where the Court decided that the onus would be on the taxpayer to “demolish the basic fact on which the taxation rested”.  The rationale behind this conclusion is that the Canadian tax system is a self-assessing system, and the taxpayer should be bestapprised to know the facts upon which he/she filed the tax return.

WHEN DOES CRA BEAR THE BURDEN?

There are certain circumstances where the burden and onus flips back to CRA.  This usually happens in circumstances where it can be shown that CRA is better positioned to understand and know the facts.

For example:

  • Over the last couple of weeks, I have been talking about administrative penalties.  One of those penalties is the “gross negligence penalty”.  CRA bears the burden of proof with respect to these penalties.  As indicated in the post, CRA typically prepares a “penalty recommendation report” which sets out the evidence they have to support their position.
  • In the Anchor Pointe Energy case (2007), the Federal Court of Appeal talked about another circumstance where CRA would bear the initial onus/burden.   The Court felt that where assumptions were within CRAs knowledge only, then it would only be appropriate for CRA to bear the burden.  Consider the situation where CRA is making an assumption based on the circumstances of another taxpayer (and that taxpayer is unknown/unrelated to the taxpayer who has filed the appeal).
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It’s my accountant’s fault… Third Party Advisor Penalties

February 15, 2021

Put your hand up if this sounds familiar to you:

  • Taxpayer goes on a cruise.
  • Taxpayer hears about a neat option to save tax.
  • Taxpayer buys into the “option”.
  • Taxpayer gets audited.
  • CRA says taxpayer owes more money and that the taxpayer participated in a “scheme”.
  • Turns out the taxpayer is one of 1000 people that also got assessed for the same “scheme”

Unfortunately, I have heard this story too many times.  It can wreak havoc on a taxpayer and can be scary for the tax preparer – especially if the tax preparer does not have all the information about the “scheme”.

Not to scare anyone, but sometimes a penalty can apply to a third party – including a tax preparer – if there is a “misrepresentation” on a tax return.  I am talking about the “third party civil penalties”.

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Oops, I did it again! Failure to file, and Repeated Failure to File Penalties

February 8, 2021

Be honest with me.  You were totally singing Britney Spears right now… and if you own a Peloton, you might be channeling Cody Rigsby’s dance moves too!

Now that I have your attention, let’s talk about another category of “administrative penalty” – the failure to file penalty.

This particular penalty includes a clause pertaining to not only a one-time failure to file, but also a repeated failure to file.

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What does it mean to be “grossly negligent”?

February 1, 2021

Picture this scenario:

You have been dealing with a CRA audit for the last couple of months.  Today, you get a final letter from CRA that sets out the changes/adjustments they plan to make to your assessment.  The letter includes a 30 day time frame for you to make any additional submissions. 

Your eyes scan down the changes, and come to a paragraph that talks about “gross negligence” penalties.  Immediately, you panic. 

Are you being criminally charged? 

Is CRA saying you are a “bad person”????

Can you do anything about this????

If this scenario sounds familiar to you, please know that you are not alone.  In the last couple of years, I have seen an increase in the times that CRA chooses to assess gross negligence penalties. 

Let’s break down “gross negligence penalties”.

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Filing your 2020 tax return – are you ready?

January 25, 2021

Cue music from Game of Thrones…

Tax season is coming. 

Yes, I recognize that the deadline for filing your personal T1 income tax return is April 30th (June 15th for self-employed individuals).   So, you might be thinking, “Amanda – why are you raising this now?!?!?”

I chose today to blog about this topic because I believe that filing the 2020 T1 income tax return will be a bit more complex than in past years.  So why not get a head start on things?

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But my home is my office! De-coding the 2020 WFH expense rules

January 18, 2021

Like the rest of the world, I also packed up my office and moved home in March 2020.   My new office was located somewhere between my living room and my kitchen.  Thank goodness for the Costco folding table we had purchased a number of years ago.

Over the next couple of months, I amassed some new office supplies – a new standing desk, a scanner, a printer.

I had previously reviewed the rules in the Income Tax Act (Canada) regarding home office expenses – albeit for my clients.  But there is definitely a renewed interest in the topic in light of the more recent changes to the home office expense rules for 2020.

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How long is your arm? A discussion on non-arm’s length transactions

January 11, 2021

Consider the following scenario:

Jim and Mary decide to sell their house to their son John.  A local realtor told them that they could sell the house for around $500,000.  But John helped them with some painting and drywall work so they decided to sell the house to John for $300,000 instead.

Jim and Mary figured there was no need to put anything in writing to document the sale.  After all, everyone knew the terms of the deal – they had figured it out over breakfast the other morning.  They went down to the local land titles office and filled out the transfer documents.

Two years later, Canada Revenue Agency (CRA) decided to audit Jim and Mary.   The CRA auditor told Jim and Mary that he did not agree with the sale price on the property.

Unfortunately, I regularly receive a call asking for help with this very scenario.

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Everything you ever wanted to know about the Principal Residence Exemption

January 4, 2021

Happy 2021!

Do you own a house?

Do you own a cabin?

Do you know how the sale of the house and/or the cabin will be taxed?

Later this week, I am releasing the first episode of Season 2 of The Tax Chick Podcast, featuring fellow tax chick, Anna Malazhavaya. Anna and I are chatting about a topic that impacts many individual taxpayers – access to the “principal residence exemption”.

Let’s take a few moments to break down the fundamentals of this rule.

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The Tax Chick Top 10 of 2020

December 28, 2020

Well, 2020 has certainly been a year for the history books.

But I will always remember 2020 as the year I launched “The Tax Chick” – a creative project that I had been mulling over for quite some time.  Without the pandemic, I am not sure when I would have “pulled the trigger” on this endeavor.

It has now been 7 months since I launched “The Tax Chick Blog”, and 4 months since I launched “The Tax Chick Podcast”.  In the spirit of year-end countdowns, I thought I would take this opportunity to highlight some of my favorite moments from the blog and podcast.

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The lowdown on TFSAs

December 21, 2020

In last week’s blog post, I provided a general overview of RRSPs. 

Continuing on the “investment” theme, in today’s post I will break down what you need to know about another famous acronym… the TFSA.

What is a TFSA?

A “TFSA” stands for “Tax Free Savings Account”.  TFSAs were introduced in Canada in 2009.  Similar to an RRSP, there is an annual contribution limit, and if you go over the limit, there is a penalty.

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The lowdown on RRSPs

December 14, 2020

Last week, I released a new episode of “The Tax Chick Podcast” featuring my friend and personal financial advisor, Janea Dieno.  We tackled the questions that you wondered about, but did not want to ask:

  • How do I know if my advisor is qualified?
  • How does my advisor get paid?
  • Why do I need an advisor?  (i.e., “I already have a pension plan.”)

In addition, we ended off the episode by talking about everyone’s favorite acronyms:  RRSPs, TFSAs, GICs…

To round off 2020, I thought it might be helpful to do a series of short blog posts on some of these investment vehicles. 

The focus of today’s post will be… RRSPs.

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The Capital Gains Exemption

December 7, 2020

“It’s OK Amanda, I will just use my capital gains exemption.”

In keeping with the theme of the last couple of blog posts, I thought it might be timely to move from a discussion of the “rollover” rules to a discussion of the “Capital Gains Exemption”.  A quick recap:

  • A “rollover” is when property is transferred at cost, and a gain is not triggered at the time of transfer.  The person receiving the property receives it at cost.
  • In contrast, it is possible to transfer property at fair market value and trigger the gain.  But then offset the gain with the “capital gains exemption”.
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Rollover does not mean tax free – Part II

November 30, 2020

In last week’s blog post, I introduced the concept of a tax “rollover” – and explained that a rollover is not truly a “tax free” transaction.  It is better characterized as tax “deferral” (a.k.a. Future Amanda’s problem).

When working on an estate plan for someone with farming or fishing assets, it is important to consider the intersection of the “rollover” rules with taxation on death.  In today’s blog post, I wanted to continue the rollover discussion and address shares of a family farm corporation.

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Rollover does not mean tax free – Part I

November 23, 2020

“But Amanda, I can just roll that over to my child.”

“Don’t I get a rollover?”

Ah, the “rollover”.   One of the more misunderstood facets of Canadian tax law.  When describing it to clients I often find myself waving my hands and doing a little dance (picture Carlton from Fresh Prince of Bel Air). 

Rollover and “tax free” are two concepts that I spend a lot of time demystifying for clients.  Nothing is tax free.  Instead, I like to discuss “tax deferral” – we cannot necessarily eliminate the tax altogether, we just push it out to the future.  A rollover is essentially a transfer of property that does not attract any tax (or minimal tax) at the time of transfer – the tax bill comes at a later date.

It is generally accepted in Canadian tax law that farm businesses and fishing businesses have access to some “special” tax rules.  It is very important to have a base understanding of these rules when considering an estate plan that involves farming and fishing assets.  I must admit, living in a land-locked province, I do not see much estate planning work involving fisherman.  So for the next few posts, I am going to focus on farming.

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Digital Assets 101: You may be more tech savvy than you think

November 16, 2020

Situation:  A meeting with clients to discuss estate planning

Me:  “We should probably take a few moments to discuss your digital assets.”

Client:  “I do not have any of those.”

Me: “Do you have a cell phone?”

Client:  “Yes”

Me:  “Well then you have some digital assets.  Let’s discuss.”

What have we learned from this conversation?

  1. Most of us actually have digital assets but have not yet turned our minds to what will happen to those assets on death.

And perhaps more importantly,

2. I need to stop using the phrase “digital assets” and speak in plain English!

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I do not need to make a Will… and other lies we tell ourselves as we fall asleep

November 9, 2020

Today’s blog post is inspired by a call I received recently from one of my clients.  The client indicated that this year, he planned to give each of his adult children a Will as their Christmas gift.  Perhaps it is just my inner law geek, but I thought that was the best gift ever!

However, he was not sure that his kids would see the value of the gift.

He asked me if I had any resources/materials that he could share with his children on why having a Will is important.

I immediately went to my blog, because I was sure I had written on this topic in the past – but I could not find anything directly on point.  (Shame on me!)  

I ended up sending my client a link to the Public Legal Education Association of Saskatchewan site which provides an excellent overview of why to make a Will.  In case you are curious, here is the link: https://www.plea.org/plans-for-the-future/will.

This whole exchange got me thinking about the fact that I do find myself having to justify the need to make a Will on a fairly regular basis.   Given that my last few blog posts have focused on estate planning issues, I thought it might be helpful to include my top 5 reasons for getting your estate plan in order.

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Clearance Certificates – a Clean Slate?

November 2, 2020

It turns out that I underestimated how many exciting topics on estate planning that I could cover – so all of the November blog posts will also have an estate planning theme.  Consider this my early Christmas gift to you 😊

I previously taught Wills & Estates at the University of Saskatchewan College of Law for many years.  One of my lectures was entitled, “How to train your executor” and focused on answering some key questions that a new executor typically asks of their lawyer. This included a discussion on interactions with CRA, and the provision of key information on clearance certificates.   Today’s blog post will cover a couple of these topics.

Should an executor notify CRA?

CRA actually has an excellent information bulletin entitled, “What to do following a death”: https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4111/rc4111-19e.pdf .  The last page of this document contains a form that can be filled out and sent to CRA to advise of the death of a taxpayer. 

Why does this matter?

  • It will give the authorized representative the authority to request that CRA stop certain benefit and credit payments and (if applicable) transfer them to the survivor.  (For example, GST/HST credits, working income tax benefit advance payments, and Canada child benefit.)
  • It lets CRA know the right address for correspondence – this way, nothing is missed.

As part of this process, it is typically suggested that the executor/administrator become authorized on the deceased taxpayer’s account.  This way, if they need to call CRA for information, or are signing a tax return on behalf of the deceased, CRA is already aware of the death, and of the name of the representative.  Here is where you can find out more information on who qualifies as a “legal representative”: https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/what-when-someone-died/legal-representative.html.

What is a clearance certificate and how do you get one?

It is the responsibility of the legal representative (i.e., the executor/administrator) to:

  • File all required returns for the deceased person;
  • Ensure that all taxes owing are paid;
  • Notify beneficiaries if any amounts they are receiving from the estate will be taxable.

Before distributing all of the assets in an estate, an executor would be wise to obtain a clearance certificate from CRA.  The purpose of a clearance certificate is to confirm that all tax, interest and penalties have been paid, and it allows the executor/administrator to distribute assets without the risk of being personally liable for any amounts owing by the deceased or the estate to CRA.

In order to obtain a clearance certificate, the executor/administrator must fill out and submit form TX19 (income tax), and/or GST352.  Further details on the application process can be found here: https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/what-when-someone-died/clearance-certificate.html

Keep in mind that the clearance certificate cannot be obtained until after all notices of assessment for all tax returns have been received and all tax liabilities have been paid.   Further, a clearance certificate only protects the legal representative (i.e., the executor/administrator).  It does not provide any benefit to the beneficiaries.  As a result, if the executor is also the sole beneficiary, it is questionable whether there is any purpose in obtaining a clearance certificate.

Additional Resources

If you are looking for additional resources for yourself or a client on the role of an executor, here are some suggestions:

  1. In Canada, the courts typically have informational packages for would-be executors/administrators that provide some detail on the probate process (see my October 5th blog post for more details on probate).  For example, the Saskatchewan Court of Queen’s Bench has a package that is available online: https://sasklawcourts.ca/index.php/home/court-of-queen-s-bench/wills-and-estates/application-for-probate.
  2. Because wills and estate administration are matters of provincial jurisdiction, it is important to review materials from the correct province.  Most provinces have a public legal education association which provides excellent free resources on a variety of legal topics, including estate planning and administration.  In Saskatchewan, we have the “Public Legal Education Association of Saskatchewan”, and all of their materials on death and estate planning can be found at the following link: https://www.plea.org/death-estates .
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Charitable Donations on Death

October 26, 2020

When meeting with clients on estate planning matters, I find that generally the place where people get “stuck” on what to do is the common disaster scenario. I often refer to this as the “Disneyland” clause – i.e., what do you do if you and your entire family are on a Christmas trip to Disneyland and the plane goes down?

I typically get one of the following responses from clients regarding the common disaster scenario:

  1. That would never happen.  I do not even want to think about that scenario.
  2. I guess maybe I would list out my nieces and nephews? 
  3. I will need to do some thinking.  Maybe there is a charity I would like to benefit.

Today’s blog post is going to focus on response #3 – charitable donations.

Although some of my clients are already informed on charitable donation tax credits, for the most part I find that the initial intention behind a charitable donation has nothing to do with the potential tax credit.  Instead there is usually an emotional connection to a particular cause and the tax credit is merely the “icing on the cake”.   

Do you have a qualified charity?

Keep in mind that in order to obtain the tax credit, the charity must be registered with Canada Revenue Agency (“CRA”).  In addition, it is key that the charity is correctly named in the testamentary document.  In practice, I typically complete a search for the charity on the Government of Canada website: https://apps.cra-arc.gc.ca/ebci/hacc/srch/pub/dsplyBscSrch?request_locale=en.  In the Will itself, I will ensure to use the formal registered name of the charity, and I typically include the charitable registration number for ease of identification. 

There are some circumstances where the client wishes to leave funds for a quasi-charitable purpose (i.e., for a project to be completed by a municipal board) that will not qualify for a donation tax credit.  This is perfectly acceptable – as long as the client understands that the donation will not result in a tax credit.

When can the tax credit be claimed?

For persons who died after 2016, donations made pursuant to a will (or designated in a financial instrument such as an RRSP, RRIF, TFSA and/or life insurance policy) will be deemed to be made by the estate at the time the property is transferred to the charity.  There is flexibility within the estate as to when/how the donation is allocated. 

If the donation is made within 60 months of the death, the donation may be claimed in: (1) the final tax return of the deceased; (2) the tax return of the deceased prior to the year of death; or (3) the tax return of the deceased for the year when the transfer to the charity was made.

If the donation is made within 36 months of death, the donation can be claimed in any of the above-noted circumstances, or in any prior tax year of the estate.

“In-Kind” Donations

Thanks to one of my readers for asking me to address “in-kind” donations!

Sometimes, instead of leaving a specific sum of money to a charity, a person wants to leave a non-cash gift.  For example, if someone donated a piece of art, shares of a public corporation or a car to the charity.  We typically refer to this as leaving a gift “in-kind”.  Although this is perfectly legitimate, it can sometimes create some hurdles on valuation. 

In order for CRA to issue a charitable donation receipt, it needs to be able to verify the amount of the gift.  This is easy to do when the gift is money.  However, it is slightly more difficult when the gift is an asset.  The onus is on the charity to ensure that it has accurate information about the fair market value of the gift, and that the correct amount is listed on the charitable donation receipt.  For more information on valuing in-kind gifts, please see this information bulletin from CRA: https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/operating-a-registered-charity/issuing-receipts/determining-fair-market-value-gifts-kind-non-cash-gifts.html.  CRA suggests that if the value of the gift is over $1,000, a formal appraisal should be obtained.

How do I choose a charity?

Occasionally, a client will not know what charity they wish to benefit and will ask me to be a part of the brainstorming process.  In this instance, I will usually have the client list off all the things that are important to them in their life and I write it down on a white piece of paper.  This will include educational pursuits, hobbies, past life obstacles, current things they are passionate about.  Once we have a full list, we can group the items into categories.  Then, I typically ask the following question:

“If you could choose, would you prefer to help someone locally,
or would you prefer for your gift to have a broader/global impact?”

The Government of Canada charitable registration site is a great source of information about potential options.  I usually encourage clients to spend some time completing research on the options available to them prior to deciding.  Keep in mind that you can name more than one charity.  In addition, if the client has a very specific wish as to what the money would be used for, I usually encourage the client to reach out to the charity to find out if the charity would be amenable.  Some charities provide the ability for the client to fill out internal documentation in advance which sets out specific wishes/intentions for the gift.  

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Death – The Ultimate Yard Sale

October 19, 2020

I am not someone who really gets excited about a yard sale. I make piles, and have the intention to put a sale together, but never get around to it. As a result, I tend to donate items I am no longer using and have only dipped my toe in the online sales community a few times. However, regardless of your stance on yard sales, it is important to remember that in Canada, a certain event will prompt the biggest yard sale of your life…. i.e., your death.

Keeping with this month’s estate planning theme, I thought it might be helpful to briefly explore the Canadian income tax rules on death.   Here are 5 fast facts about the “Ultimate Yard Sale”:

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I think I would like to add my adult child onto my bank account… or to the title to my house. What do you think?

October 12, 2020

Happy Thanksgiving weekend to all of my Canadian readers!

I promised you a month of estate planning goodies, so here we go with Week #2 – joint ownership of property.

When I meet with clients for estate planning, we usually spend some time talking about what they own.  There are two key things I have learned from these conversations over the years:

  1. People do not always know exactly what they own, or how they own it.
  2. People are very preoccupied with rearranging ownership in order to avoid paying probate fees, or to make things “easier”.

I thought it might be helpful to address both of these issues in today’s blog post.

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A primer on probate fees in Canada

October 5, 2020

“I do not want to pay probate fees!”

I have heard this statement so many times from clients.  Someone, somewhere, is feeding information to the general public about the evils of probate fees. 

Can probate fees be considerable in certain circumstances?

Yes… depending on the asset base… and depending on the province where probate is obtained.

For the next month of blog posts, I thought it might be helpful to tackle the intersection of taxation and estate planning – beginning with probate fees.

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Tax Chick Tips on Surviving an Audit

September 28, 2020

Last week, I was arguing an appeal in the Tax Court of Canada. The case was about the application of the specific anti-avoidance rule found in ss. 256(2.1) of the Income Tax Act (Canada) to a set of corporate taxpayers. I will give you an update on how that turned out once the decision is released…

In the meantime, we return to our regularly scheduled programming.  Today, I wanted to talk a bit about audits.

Audits are generally not a fun thing to endure.  An audit is a bit like going through security screening at an airport – the whole environment has the ability to make you feel guilty, even if you have not done anything wrong.

But if you are an honest person and have done your best to file your taxes properly, then you should not have much to fear with an audit.  At worst, the auditor might find a mistake that was made, which might result in some additional tax to pay.   You will also lose time dealing with the audit, which could otherwise have been spent with family, relaxation or perhaps on your business.

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Five Quick Facts about the Tax Court of Canada

September 21, 2020

I had planned to take a week off from the blog to focus on a Tax Court of Canada hearing I am running this week which involves the application of the specific anti-avoidance rule in ss. 256(2.1) of the Income Tax Act… but… I was sitting in my living room working on my opening statement for Court and realized I had a serious case of writer’s block.

In the past, when I have writer’s block, I find it helpful to switch gears and write about something that I know. So here goes nothing!

Clients often find the Tax Court of Canada process to be quite mysterious. Just the other day, I had a witness ask if we still wore robes and wigs to court. (As an aside, I had the privilege of taking Appellate Advocacy in law school from a visiting professor who also happened to a be a judge in Australia – where the judges (at that time) still wore wigs. He brought his wig to class so we could check it out! If you are interested in learning more about the history of wig wearing by the Courts in Australia, here is a great article: http://www.courts.sa.gov.au/Community/ForSchools/Resources/Pages/History-of-wigs.aspx).

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Taxpayer Relief – I have applied, so why don’t I feel relieved?

September 14, 2020

Things happen that are sometimes out of our control.

We get sick.

Our basement floods and destroys our records.

Or…

We go on lockdown due to a global pandemic.

These unexpected events can sometimes have an affect on our ability to file our tax returns in a timely manner, and in paying amounts owing in a timely manner. 

In past blog posts, I have already tackled some options for you when you do not agree (or cannot pay) the taxes owing.  In this week’s post, I want to focus on options available to reduce or eliminate interest and penalties accruing on an account.  Today, we will be discussing “Taxpayer Relief”.

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I Object! An overview of the internal appeals process at Canada Revenue Agency

September 7, 2020

It is an otherwise happy Monday afternoon, and you stop by your mailbox on the way home. You open the mailbox and pull out… the dreaded brown envelope.

I do this for a living, and my heart still skips a beat when I see an email from Canada Revenue Agency, or open up one of those brown envelopes.

Step #1.  Do not panic.  Open the envelope and see what it says.  Sometimes, you get a letter informing you of a refund that will be deposited into your account.  High five to you!

However, I am guessing that you are not surprised to get this letter.  Because you likely just filed your tax return, or have been dealing with a CRA auditor for the last couple of months.  I am also guessing that the letter probably is telling you that you owe some money to CRA.

In last week’s blog post, I provided you with some helpful tips for dealing with CRA Collections division.  One of those tips was to determine whether you agreed with the amount owing.  If you do not, consideration should be given as to whether it is appropriate to file a “Notice of Objection”.

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Tax Chick Tips for Dealing with CRA Collections

August 31, 2020

Cue Eminem’s  “Without Me” music:

Guess who’s back,

Back again,

CRA collections is back,

Tell your friends…

Yes, my friends – after a brief, but pleasant moratorium on collections calls, it is very likely that CRA Collections will begin actively pursuing outstanding accounts again very soon.

Seems like an appropriate time for a Top 10 list of tips when communicating with CRA Collections:

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Remission Orders – legal unicorns?

August 24, 2020

A number of years ago I made the decision to go back to school and to obtain a Professional LL.M. from York University (with a specialty in tax law).   During my studies, I stumbled across the topic of remission orders and was so fascinated by them, that I decided to base my major paper on the issue.

Very little has been written on the topic of remission orders until the last year or so.  However, you may recall a news story a number of years ago about BlackBerry being granted remission by the Federal Government.  (For more details on that story, see my article for Canadian Tax Focus: https://www.ctf.ca/ctfweb/EN/Newsletters/Canadian_Tax_Focus/2014/2/140202.aspx.)

Remission orders are like the “unicorns” of tax law.  They are mystical creatures that sound so pretty, but yet really difficult to locate.  To date, the only electronic service which provides a form of database for remission orders is Knotia – but that database is not easily accessible or searchable.  As a result, the best method of obtaining information on remission orders continues to be a search of each issue of the Canada Gazette.  Did I mention I consumed a lot of caffeine while trying to finish my masters?

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Rescission – the eraser “for BIG mistakes”

August 17, 2020

Do you remember the giant pink novelty eraser labelled “for BIG mistakes”? 

Sometimes, a mistake occurs that is so bad you wish you could just erase the whole transaction and start over again.

In last week’s blog post, I explored the equitable doctrine of “rectification” – where parties can seek approval of the Court to retroactively amend a transaction.  But what happens if you just want the whole transaction to be “erased”?

One potential option is the equitable doctrine of “rescission”.

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Presto Chango – the role of rectification in tax law

August 10, 2020

Mistakes happen. 

Often, when a mistake occurs, there is a desire to invoke what I like to call the “self-help” remedy – fix the document internally and hope for the best.

In last week’s blog post, I explored the concept of “backdating”, and why this not a good solution to a problem.  One of the issues with backdating, is that an internal change to a document is not binding on third parties – i.e., Canada Revenue Agency (CRA).

So, what can you do if you need to fix a mistake on a set of documents?  One potential option is an application for rectification.

What is rectification?

Rectification is an equitable remedy.  It allows a transaction to be amended retroactively.  Rectification is different from rescission which allows a transaction to be retroactively annulled, cancelled or set aside.  More about rescission in next week’s blog post.

In order for rectification to be binding on a third party it requires a court order.  The relevant court in this instance is the superior court of a particular province.  For example, in Saskatchewan, an order for rectification would be sought from the Saskatchewan Court of Queen’s Bench.  This is the case even if you are seeking rectification because of a tax issue – the Tax Court of Canada does not have jurisdiction to grant rectification.  As a result, sometimes it is necessary to have two open court applications at the same time – one to the superior court of the province for rectification, and the second to the Tax Court of Canada to appeal the underlying reassessment.

What are the requirements for rectification?

There are four requirements that must be met in order to get rectification:

  1. There must be a prior agreement.  This agreement needs to be in writing – you cannot “fix” a verbal agreement through rectification.  The terms of this agreement need to be “definite and ascertainable”.  In other words, it needs to be clear what the agreement was.
  2. The agreement had to have been in effect at the time the written document was prepared and signed (i.e., no backdating).
  3. The written document must be inconsistent with the agreement of the parties.  For example, the parties could have agreed to sell Class “A” shares, but the document says they are selling Class “B” shares.
  4. There must be a written document that can be amended to carry out the prior agreement.

There must be evidence of the original intention of the parties – and this intention must be specific. It is not enough to say, “We intended that there would be no tax consequences.” Instead, there needs to be evidence of the specific intention. If we continue with the example noted in point 3 above, there would need to be some evidence that the parties intended to sell Class “A” shares. Not just that they intended to sell shares or that they intended to sell the shares without triggering any tax consequences. In addition, someone needs to admit to making the mistake. Finally, there needs to be a document that can be fixed. As mentioned above, if there is no written document to fix, rectification is not possible.

The scope of rectification was narrowed significantly following the release of the Supreme Court of Canada decisions in Fairmont Hotels and Jean Coutu. The big concern addressed in those decisions was whether or not rectification was being used to engage in retroactive tax planning. It is now suggested that rectification is only available to fix clerical errors. The Courts have not necessarily been consistent in their interpretation of the Supreme Court of Canada decisions.

What is the process for obtaining rectification?

As indicated above, rectification needs to be obtained by court order if it is going to be binding on third parties.  When the error that is discovered results in a tax consequence, it will be necessary to involve CRA in the application.  Similarly, if the error involves a filing with the provincial or federal corporate registry, or Land Titles office, it may be necessary to involve that particular office as well.

CRA has a National Rectification Committee that reviews and considers all rectification applications across the country.  In my practice, I typically consult with this Committee early on in the process and provide sworn affidavit evidence and a proposed court order to the Committee for review.  I also name the Minister of National Revenue as a party to the application.  Provided that the evidence is sufficient, the Minister (through the Committee representative) will provide a letter of “non-opposition” to be filed with the Court.

Once the Court order is issued, it is important to obtain signature on the newly “fixed” or “rectified” documents, to provide a copy of those documents to CRA, and to update the corporate records. 

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Time Travelling Documents – why backdating is always a bad idea

August 3, 2020

Question: “So, my partner and I sat down this morning and we decided that the agreement has to be dated January 1, 2020.”

Me/Answer: “I need a bit more information before we can decide that January 1, 2020 is an appropriate date.”

Question: “What is the big deal?  Just use that date!  No one will ever know!”

I wish I could say that I made up this conversation, but I did not.  I have had this conversation several times in my career.  There are often attempts by others to “bully” advisors into preparing documents on terms that do not squarely match reality.

The purpose of today’s blog post is two-fold:

  1. What is backdating, and when is it appropriate (if ever)?
  2. A quick discussion of the ethical responsibilities of advisors.
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Planes, Trains and Automobiles: Taxation of Travel

July 27, 2020

One of the most common audit issues that I run across on a regular basis is a disallowed travel expense.   If you are claiming travel expenses as an employee or as a business owner, it is important to know the parameters of a valid expense and what documentation is required to prove validity. 

Let’s break down the rules for some of the more common travel-related claims:

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Large Corporations: What are they and why do we care?

July 20, 2020

Picture this:  You have set up a successful corporation and are up to date with all your tax filings.  One morning, you get a phone call from Canada Revenue Agency advising that you have been selected for an audit.  The audit happens and it results in a reassessment.  You do not agree with the reassessment and plan to object.  However, before you have a chance to call your lawyer, you find out that $50,000 was just scooped from your corporate bank account by CRA to pay a portion of the amount owing on the reassessment.

You are so confused and really mad.  You call your lawyer to ask how this could have happened!  You remember reading somewhere that CRA is prohibited from taking collections action until the deadline for filing an appeal has passed.  Your lawyer asks, “Are you a large corporation?”  You respond, “I don’t know – what does that have to do with anything???”

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But I said I was sorry! Five fast facts about the Voluntary Disclosure Program

July 13, 2020

Tax litigators are rarely called upon to provide advice in a “preventative” fashion.  Usually, we get a panicked call from the taxpayer after something has happened. 

When I am contacted by a client (or his/her advisor) about a problem, my mind instantly starts running through possible “solutions” and the pros and cons of each solution.  Some of these “solutions” include:  remission orders, rectification orders, rescission orders, Notices of Objection, Taxpayer Relief applications, and utilizing legislative provisions to allow for late filing of an election/return or the amendment of an election/return.  These solutions are akin to tools on a tool belt.  You have to find the right one, and sometimes you might need two or three to get the job done.

Prior to 2018, one of the “tools” I commonly considered using was the “Voluntary Disclosures Program” (“VDP”) at Canada Revenue Agency.   The purpose of this program is to provide relief from penalties (and in some cases, interest) for taxpayers who voluntarily come forward to correct previous errors or omissions.  However, the program was overhauled in 2017/2018, resulting in a drastic change to the applicability of the program.

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The lowdown on paying your income tax by instalments.

July 6, 2020

Recently, I received a few questions about instalment payments. I remember feeling a bit frazzled myself when I tackled my first instalment payment a couple years ago. Pre-paying taxes can sometimes be a more “taxing” process than you would expect…

Here are three key things you should know about instalment payments:

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Deal or no deal – the complicated business of settling tax disputes

June 29, 2020

“How about if we offer them 75 cents on the dollar?”

“Can’t we just offer to split the difference?”

“Why does this have to be so complicated?”

These are frustrations that have been expressed by my clients over the years when discussing resolution of a tax appeal.  There is a misconception in the general public that Canada Revenue Agency (CRA) and the Minister of National Revenue can just “make a deal” with taxpayers.  Not so.

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When circus performers go to the moon…a candid discussion on business expenses, and the meaning of taxable benefits

June 22, 2020

In 2009, Guy Laliberté (Quebec billionaire, and co-founder of Cirque du Soleil) was Canada’s first “space tourist” – spending 12 days aboard the International Space Station.  Unfortunately, this little trip to outer space cost him a whopping $41.8 million dollars.  Laliberté took the position that this was a business trip, intended to boost the Cirque du Soleil launch in Russia, and to celebrate the 25th anniversary of the circus.  There was also an assertion that the trip would help to promote Laliberté’s clean water charity, One Drop.  As a result, he paid for the trip through his holding company and was reimbursed by the controlling company of Cirque du Soleil – except for a self-assessed $4 million dollar shareholder benefit.

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The downside of being a director – traps for the unwary…

June 15, 2020

There is a mistaken belief floating around that directors of a corporation are immune from liability. This is simply not true.

It is a big decision to agree to be a director of a corporation.  Unfortunately, many people are unaware of the duties and responsibilities of a director, and the potential consequences of failing to live up to those responsibilities.   Many are also of the mistaken belief that the rules are different for those acting as directors on non-profit boards, or those acting as directors of closely-held private corporations. 

The purpose of today’s blog post is to raise awareness about the responsibilities of a director, and also to outline some key points on how to defend against a claim of liability.

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